PDF Bill Gates' 2010 Annual Letter

[Pages:18]2010 Annual Letter from Bill Gates

2010 Annual Letter from Bill Gates

This is my second annual letter. The focus of this year's letter is innovation and how it can

make the difference between a bleak future and a bright one. 2009 was the first year my full-time work was as co-chair of the foundation, along with Melinda and my dad. It's

been an incredible year and I enjoyed having lots of time to meet with the innovators working on some of the world's most important problems. I got to go out and talk with people making progress in the field, ranging from teachers in North Carolina to health workers fighting polio in India to dairy farmers in Kenya. Seeing the work firsthand reminds me of how urgent the needs are as well as how challenging it is to get all the right pieces to come together. I love my new job and feel lucky to get to focus my time on these problems.

The global recession hit hard in 2009 and is a huge setback. The neediest suffer the most in a downturn. 2009 started with no one knowing how long the financial crisis would last and how damaging its effects would be. Looking back now, we can say that the market hit a bottom in March and that in the second half of the year the economy stopped shrinking and started to grow again. I talked to Warren Buffett, our co-trustee, more than ever this year to try to understand what was going on in the economy.

Although the acute financial crisis is over, the economy is still weak, and the world will spend a lot of years undoing the damage, which includes lingering unemployment and huge government deficits and debts at record levels. Later in the letter I'll talk more about the effects of these deficits on governments' foreign aid budgets. Despite the tough economy, I am still very optimistic about the progress we can make in the years ahead. A combination of scientific innovations and great leaders who are working on behalf of the world's poorest people will continue to improve the human condition.

One particular highlight from the year came last summer, when I traveled to India to learn about innovative programs they have recently added to their health system. The health statistics from northern India are terrible--nearly 10 percent of children there die before the age of 5. In response, the Indian government is committed to increasing its focus and spending on health. On the trip I got to talk to Nitish Kumar, the chief minister of Bihar, one of the poorest states in India, and hear about some great work he is doing to improve vaccination rates. I also got to meet with Rahul Gandhi, who is part of a new generation of political leaders focused on making sure these investments are well spent. The foundation is considering funding measurement systems to help improve these programs. Rahul was very frank in saying that right now a lot of the money is not getting to the intended recipients and that it won't be easy to fix. His openness was refreshing, since many politicians won't say anything that might discourage a donor from giving more. He explained how organizing local groups, primarily of women, and making sure they watch over the spending is one tactic he has seen make a big difference. The long-term commitment to measuring results and improving the delivery systems that I heard from him and other young politicians assured me that health in India will improve substantially in the decade ahead.

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2010 Annual Letter from Bill Gates

From left: Visiting a smallholder dairy farm in Kabiyet (Rift Valley Province, Kenya, 2009); Indian politician Rahul Gandhi speaking in Raipur Phulwari (Uttar Pradesh, India, 2008); cassava research laboratory at the National Crops Resources Research Institute (Namulonge, Uganda, 2009).

Innovation: The Difference Between a Bleak Future and a Bright One

In India, just like everywhere else we work, the needs of the poor are greater than the resources available to help them solve their problems. It is important to get more money, but that alone will not solve the big problems. This is why Melinda and I are such big believers in innovations that allow you to do a lot more for the same cost.

During the last two centuries, there have been a huge number of innovations that have fundamentally changed the human condition--more than doubling our life span and giving us cheap energy and more food. Society underinvests in innovation in general but particularly in two important areas. One area is innovations that would mostly benefit poor people--there is too little investment here because the poor can't generate a market demand. The second area is sectors like education or preventative health services, where there isn't an agreed-upon measure of excellence to tell the market how to pick the best ideas.

If we project what the world will be like 10 years from now without innovation in health, education, energy, or food, the picture is quite bleak. Health costs for the rich will escalate, forcing tough trade-offs and keeping the poor stuck in the bad situation they are in today. In the United States, rising education costs will mean that fewer people will be able to get a great college education and the public K?12 system will still be doing a poor job for the underprivileged. We will have to increase the price of energy to reduce consumption, and the poor will suffer from both this higher cost and the effects of climate change. In food we will have big shortages because we won't have enough land to feed the world's growing population and support its richer diet.

However, I am optimistic that innovations will allow us to avoid these bleak outcomes. In the United States, advances in online learning and new ways to help teachers improve will make a great education more accessible than ever. With vaccines, drugs, and other improvements, health in poor countries will continue to get better, and people will choose to have smaller families. With better seeds, training, and access to markets, farmers in poor countries will be able to grow more food. The world will find clean ways to produce electricity at a lower cost, and more people will lift themselves out of poverty.

Although innovation is unpredictable, there is a lot that governments, private companies, and foundations can do to accelerate it. Rich governments need to spend more on research and development, for instance, and we need better measurement systems in health and education to determine what works.

Melinda and I see our foundation's key role as investing in innovations that would not otherwise be funded. This draws not only on our backgrounds in technology but also on the foundation's size and ability to take a longterm view and take large risks on new approaches. Warren Buffett put it well in 2006 when he told us, "Don't just go for safe projects. You can bat a thousand in this game if you want to by doing nothing important. Or you'll

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2010 Annual Letter from Bill Gates

Innovation Chart: Examples of ideas the foundation is funding

INNOVATION TIME FRAME BENEFICIARY BENEFIT

CONSTRAINTS

RISK PARTNERS

GLOBAL HEALTH PROGRAM

Pneumonia and rotavirus vaccine delivery

30 percent coverage in 5 years, 80 percent in 10 years

135 million

More than 490,000

Can it be made cheaply enough Low

children born lives saved per year; for countries to afford it? Will

each year--85 less disability and

they have the approval and

percent in poor lower medical costs delivery systems in place?

countries

National public health delivery systems; the GAVI Alliance; UNICEF; WHO; vaccine companies

Invention of a very effective malaria vaccine

8?15 years

600 million people living in highly endemic countries in Africa

Prevent 207 million malaria cases and 770,000 deaths in Africa each year; much greater productivity and lower medical costs

Is it possible to make a highly effective vaccine? If so, can it be made cheaply enough? Can it be delivered?

High

Malaria Vaccine Initiative; nonprofit researchers; drug companies; the U.S. National Institutes of Health (NIH)

Invention of a pill or gel to reduce the risk of getting HIV

3?7 years

150 million people at high risk of getting HIV

60 percent reduction in HIV incidence in the groups that use it

Will it be effective? Will it be cheap? How quickly can it be approved? Will countries adopt it? Will people use it frequently?

Medium NIH; nonprofits; drug companies

GLOBAL DEVELOPMENT PROGRAM

Invention of a more productive corn seed that can tolerate droughts

6?10 years

4 to 8 million farming families

24 to 35 percent increase in food to eat and sell, even during drought periods

Will regulatory agencies approve it? Will seed companies be able to make it cheaply enough? Will countries accept genetically modified seeds? Will farmers use them?

Medium

Seed companies; nonprofit research centers; African crop scientists and policy experts

Financial tools to make it easy for poor people to save money

3?5 years

50 million poor households

Less hardship in tough times and more money to invest

How can transaction costs be low enough for small amounts? Can shops or mobile phones replace visits to bank branches?

Medium Financial regulators; banks; mobile operators; retail chains

Sanitation systems as good as flush toilets without needing sewers

5?10 years

UNITED STATES PROGRAM

Measure of teacher effectiveness and systems for helping teachers improve

10?15 years

Great online courses with video and interactive learning

10 percent in 3 years and 80 percent in 8 years

All libraries having PCs with Internet connections and the training to use them

U.S. installation project was 1997?2006; now focused on maintaining access

Poor people worldwide

3 million teachers and 27 million less-privileged students in the United States

Students and teachers worldwide

People without Internet PCs at home

30 percent reduction in diarrhea in children; better living conditions

800,000 more highly effective teachers; 63 percent increase in well-qualified lessprivileged high school graduates (500,000 more per year)

Teachers learning from the best and assigning pieces to students as well as independent students using the material on their own

49,000 computers installed to provide Internet access for 20?27 million people

How much will they cost to make Medium Scientists; universities and to maintain? Will people really want to use them?

Will teachers, including their unions, schools, districts, and states, be willing to change? Will budget cuts slow the work?

High

U.S. Department of Education; school districts; charter schools; teacher groups

How appealing are the courses? Medium Great teachers; software

Can they be integrated with

partners; online

traditional schooling?

community

Will local communities sustain Low funding for keeping libraries open, maintaining connectivity, and refreshing hardware?

Libraries; librarians; library supporters; local governments; telecom companies

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2010 Annual Letter from Bill Gates

bat something less than that if you take on the really tough problems." We are backing innovations in education, food, and health as well as some related areas like savings for the poor. Later in the letter I talk about why we don't currently see a role for the foundation in energy.

We have a framework for deciding which innovations we get behind. A key criterion for us is that once the innovation is proven, the cost of maintaining it needs to be much lower than the benefit, so that individuals or governments will want to keep it going when we are no longer involved. Many things we could fund don't meet this requirement, so we stay away from them. Another consideration for us is the ability to find partners with excellent teams of people who will benefit from significant resources over a period of 5 to 15 years.

Our framework involves funding a range of ideas with different levels of risk that they could fail. The ones with low risk are where the innovation has been proven at a small scale and the challenge is to scale up the delivery. Highrisk innovations require the invention of new tools. Some are at the frontiers of science, such as finding a new drug and running a large trial to see how well it works. Other high-risk efforts involve changing social practices, such as persuading men at risk of getting HIV to get circumcised.

It is critical that we understand in advance what might prevent an innovation from succeeding at scale. For work in developing countries, the lack of skilled workers or electricity might be a key constraint. For work with teachers, we need an approach to measuring their effectiveness that they will welcome as a chance to improve rather than reject because they think it's more overhead or fear that it might be capricious. Even with the best efforts to make sure we understand the challenges, we need intermediate milestones so we can look at what we have learned about the technology or the delivery constraints and either adjust the design or decide that the project should end. We are focused on strong measurement systems and sharing our results where we have successes but also where we have failures. Innovation proceeds more rapidly when different parties can build on each other's work and avoid going down the same dead end that others have gone down.

To provide some examples, in the chart on page three I show nine innovations we are investing in, broken into sections for each of the foundation's three divisions. Overall we have about 30 innovations we are backing. Although the chart includes only one new vaccine and one new seed, we are funding vaccines for several diseases (malaria, AIDS, tuberculosis, etc.) and new seeds for many crops (corn, rice, wheat, sorghum, etc.). For each innovation I show the time frame, beneficiaries, and constraints. A few things we do, like disaster relief and scholarships, do not fit this model, but over 90 percent of our work does.

Causes of Death for Children Under Age 5

Childhood Deaths

The improved health of children in poor countries is a great example of the power of innovation. In 2008, for the first time fewer than 9 million children under age 5 died. In 2005, the last time the number was measured carefully, it was just below 10 million. This is huge progress, and it is due to improvements like increased vaccinations and better malaria treatment and prevention.

The pie chart to the right shows the primary causes of these deaths. Notice that all deaths for children under 30 days of age are grouped into a single category called "neonatal." Because the world is making very little progress in reducing these deaths, but is making progress in reducing deaths from other causes, the percentage of neonatal deaths has grown to account for more than 40 percent of all deaths in children under 5. If we make the progress we expect in preventing deaths from

19%

Other

42% Neonatal 8% Malaria

Pneumonia

5% (pneumococcus)

Pneumonia

(non-pneumococcus)

8% 5%

Diarrhea

10 (rotavirus) %

Diarrhea

(non-rotavirus)

Total under-5 deaths in 2008 = 8.8 million

2 1 % AIDS % Measles

Preliminary estimates by the Child Health Epidemiology Reference Group of WHO and UNICEF.

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2010 Annual Letter from Bill Gates

Mother with her one-month-old girl in the village of Rampur Ashu (Uttar Pradesh, India, 2007).

other causes, and still make no progress in preventing neonatal deaths, they will soon represent 60 percent of all deaths for children under 5.

Most charts showing childhood deaths don't group all of the neonatal causes together. They are broken out into categories like birth asphyxia, pre-term births, or neonatal infection. This is partly because the field of children's health used to be very siloed. The nutrition experts, for example, didn't talk to the pre-term birth experts. But this is changing. In the past decade, public health experts have realized that having separate groups focused on each of these is not the best way to improve the situation. Now leaders in global health are talking about how all these problems are connected, and they are seeing the need to focus on these deaths in an integrated way that includes interventions to reduce mothers' deaths and improve voluntary family planning. The foundation's strategy has evolved in the same way. Over the past four years we funded several pilot projects and built a strong team to lead this work. The pilots showed that the right integrated approach made a huge difference. It involved educating the mothers and the birth attendants as well as giving them some new tools such as easy-to-use antibiotics. Based on some of the early success we're seeing, we are now increasing our investment to see if we can scale up these approaches.

Melinda has a particular interest in this area and has several trips planned for 2010 to see these projects. Our working partnership makes it very comfortable for one of us to focus more intently on a particular area but always share what is being learned so we can work together in figuring out how it should fit into the overall strategy. I've always had a strong partner in the work I have done. In the early days of Microsoft it was Paul Allen, and in the later days it was Steve Ballmer. Although some people don't need this kind of partnership, I have found that only when I have a partner who knows my strengths and weaknesses can we together have the confidence to take on projects that take a long time and are high risk. When one of us is being overly pessimistic or optimistic, the other can provide a balanced view.

In the next few sections of the letter, I'll write about how innovation can help the world make progress on the other causes of childhood deaths.

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2010 Annual Letter from Bill Gates

The Miracle of Vaccines

Vaccines are a miracle because with three doses, mostly given in the first two years of life, you can prevent deadly diseases for an entire lifetime. Because the impact is so incredible, vaccines are the foundation's biggest area of investment--more than $800 million every year--and the return is substantial. We are working to get other donors to put more resources into vaccines because we still have big challenges. The first challenge is to invent them, and the second is to make sure they reach everyone who needs them. Achieving full coverage is hard in poor countries, where cost and delivery are big barriers.

Various innovations can simplify the delivery. Sometimes it's possible to combine different vaccines into one. A great example of this is the vaccines for diphtheria, tetanus, and pertussis (whooping cough). They were first introduced in the 1920s. In 1942 they were combined into a single vaccine, called a trivalent vaccine because it has three active elements. The price of all three doses of this vaccine is now less than 50 cents, and over 77 percent of children in the poorest countries of the world get all three of the doses they need to be protected. Since the trivalent vaccine was introduced in developing countries, tetanus deaths are down nearly 88 percent and pertussis deaths are down 70 percent. Almost all deaths from the three diseases would be stopped altogether if vaccine coverage were improved to 95 percent everywhere.

Even when a vaccine can't be combined with others, you can still improve distribution by making it free for poor countries, or cheap enough that they can afford to buy it. This has been a key focus for the GAVI Alliance, which we helped create almost 10 years ago. GAVI gives grants to poor countries to improve vaccine coverage and to help pay for new vaccines. GAVI has worked to get two new vaccines into widespread use since it was started. One prevents hepatitis B, an infection that eventually causes liver cancer in adults and kills over 600,000 people per year. The other prevents HiB (or Haemophilus influenzae type B), a type of bacteria that causes meningitis and other life-threatening problems during childhood. By the end of 2008, 192 million children had received the hepatitis B vaccine and 41.8 million children were protected against HiB.

Now the hepatitis B and HiB vaccines have been combined with the trivalent vaccine to create a vaccine with five active elements--a pentavalent vaccine. GAVI's work in helping to provide both the stand alone and pentavalent vaccines has raised hepatitis B coverage to 68 percent of newborns and HiB coverage to 24 percent of newborns in the poorest countries.

From left: Francis P?rez Mej?a receiving her third and final dose of rotavirus vaccine (Pantasma, Nicaragua, 2009); a technician confirming that rotavirus vaccine has remained cool during transport and is safe to use (Pantasma, Nicaragua, 2009).

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2010 Annual Letter from Bill Gates

Cost is still a problem. Today a full set of doses of the pentavalent vaccine costs over $8 more than the trivalent vaccine. But as manufacturers produce more vaccine and additional competitors come into the market, the cost premium should drop by half in the years ahead. This is why the global health community has a goal of raising coverage of HiB vaccine to over 80 percent by 2015, which could then save 250,000 lives per year in the poorest countries in addition to eliminating lots of suffering and disability.

With the progress on these vaccines, GAVI will add a focus on two vaccines that are already being used in rich countries: one for rotavirus, which causes diarrhea, and another for pneumococcus, which causes pneumonia. You can see in the childhood death chart what a large impact these new vaccines can have if widely used. Rotavirus vaccine could save 225,000 to 325,000 lives per year, and pneumococcal vaccine could save 265,000 to 400,000 lives per year.

In last year's letter, I said that I thought we could get the rotavirus vaccine out to over half of the kids who need it within six years. I still think we can achieve this in the five years we have left, but it is going to be a lot harder than I expected. Many countries have not added a new vaccine for over 20 years. Incredibly, some countries don't even have a process for deciding whether to add a new vaccine. In others, the process is still there on paper, but no one remembers who is supposed to do what. We avoided this problem with HiB and hepatitis B by creating the pentavalent vaccine, but it won't be possible to combine rotavirus and pneumococcus with other vaccines. In addition, countries understandably hesitate to add an expensive new vaccine until they have specific proof of the disease burden in their country. Sometimes they accept data from similar countries, but sometimes they don't.

This year the foundation helped launch a new approach to encourage a high-volume, low-cost supply of a pneumococcus vaccine that meets the needs of poor countries. This approach is called an Advance Market Commitment, and it involves a group of donors pledging $1.5 billion to help pay for the vaccine for poor countries. We expect that manufacturers will commit to building factories much earlier than they would otherwise in order to compete for this money. During 2010 the negotiations with manufacturers should come to a conclusion. We believe this will make a big difference in how quickly this vaccine gets to poor children and show how this approach can be applied to other medicines.

Malaria

Two years ago, Melinda and I challenged the health field to set a goal of eventually eradicating malaria. Because it is such a widespread disease, the foundation has backed a number of different types of innovations. In 2005 we helped fund a medium-risk pilot project in Zambia to test having most people in an area sleep under insecticide-treated bed nets and spray the inside of their house with insecticides. These interventions have proven to reduce malaria

Mother and child resting under an insecticide-treated bed net (Chongwe District, Zambia, 2009).

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